Morgan Stanley(MS) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q2 2025, the company reported revenues of $16.8 billion, EPS of $2.13, and a return on tangible equity (ROTCE) of 18.2% [6][12] - Year-to-date revenue reached $34.5 billion, with EPS of $4.73 and ROTCE of 20.6% [6] - The firm has achieved six consecutive quarters of durable earnings, indicating consistent performance across varying market conditions [6] Business Line Data and Key Metrics Changes - Wealth and Investment Management saw total client assets increase to over $8.2 trillion, with a record profit before tax of $2.2 billion and margins exceeding 28% [7][22] - Institutional Securities generated revenues of $7.6 billion, with equity markets contributing $3.7 billion despite a slowdown in activity during part of the quarter [8][14] - Investment banking revenues were $1.5 billion, with a notable rebound in equity underwriting, while fixed income underwriting revenues were $532 million, reflecting a decline from the previous year [15][16] Market Data and Key Metrics Changes - The company noted a strong performance in Asia and EMEA regions, contributing to the overall revenue growth in institutional securities [14] - The investment banking pipeline remains healthy, with increased activity expected as market conditions stabilize [32] Company Strategy and Development Direction - The company is focused on generating returns on incremental capital deployment and investing for growth across its integrated firm globally [6][10] - Management emphasized the importance of deepening client relationships and expanding lending capabilities, particularly in wealth management and investment banking [37][38] - The firm is also exploring inorganic growth opportunities that align with its core strategy, while maintaining a high bar for acquisitions [40][81] Management's Comments on Operating Environment and Future Outlook - Management expressed a constructive outlook on the market environment, anticipating continued growth in wealth and investment management despite ongoing economic and geopolitical uncertainties [11][31] - The firm is witnessing increased client engagement and a willingness to navigate market volatility, which is expected to support future performance [9][44] Other Important Information - The company announced a quarterly dividend increase to $1 per share, reflecting its commitment to returning capital to shareholders [10][31] - Total spot assets increased by $54 billion from the prior quarter, with a standardized CET1 ratio of 15% [30] Q&A Session Summary Question: Thoughts on incremental return on capital and regulatory environment - Management highlighted the potential for increased profitability through regulatory reform and organic growth in investment banking and wealth management [36][40] Question: Impact of tariff policy on corporate sentiment - Management noted that if tariff policies remain within expected parameters, it could clear uncertainty and lead to increased strategic activity [44] Question: Inorganic growth opportunities - Management stated that any acquisitions must align with the core strategy of raising, managing, and allocating capital for clients, with a focus on organic growth [48][50] Question: Net new assets and advisor recruitment - Management reported strong net new assets driven by workplace channels and emphasized the strength of recruiting across all channels [52][54] Question: Stablecoins and market structure legislation - Management is actively discussing the implications of stablecoin legislation and its potential impact on the business [62][64] Question: Market backdrop and trading environment - Management indicated that the trading environment has been resilient, with strong retail engagement and inflows across various channels [70][72] Question: Asset management and capital deployment - Management acknowledged the potential for growth in asset management but emphasized the focus on organic opportunities within existing businesses [78][80] Question: Net interest income in a lower rate environment - Management discussed the potential for increased lending balances to offset lower rates, indicating a stable outlook for net interest income [82][83] Question: Lending through capital markets division - Management noted a shift in lending dynamics and the potential for increased participation in corporate lending as regulatory environments normalize [88][90]